UAE clarification of Freezone Qualifying Income

[stronco]

This might have been answered already
If your FZ company follows a Jan-Dec fiscal year, is it true that it will have to pay not tax in 2023 in any case? Only from FY 2024 onward?

I am also searching for clarification regarding determination of fiscal period.

Anyone has any solid information and details about it?

 

[JackAlabama]

I am also searching for clarification regarding determination of fiscal period.

Anyone has any solid information and details about it?

its written in your memorandium most probably.

 

[Fred]

I am also searching for clarification regarding determination of fiscal period.

Anyone has any solid information and details about it?

You have to determine your Financial Year via Board Resolution.

If you determine from 01.01-31.12 this gives you additional 6 Months and your first CT filling deadline would be 09.2025.

 

[sergeylim88]

how do you determine it?
do you have to send that resolution somehwere?
isn't default financial year start Jan-Dec

 

[European]

You have to determine your Financial Year via Board Resolution.

If you determine from 01.01-31.12 this gives you additional 6 Months and your first CT filling deadline would be 09.2025.

So if your financial year is Jan-Dec and you close the FZ company by the end of 2023 you will have to pay no corporate tax at all on that company, correct?

 

[Fred]

So if your financial year is Jan-Dec and you close the FZ company by the end of 2023 you will have to pay no corporate tax at all on that company, correct?

Absolutely correct.

 

[ShillGates]

That's wrong and I mentioned just a few posts earlier why.!

You can opt to be handled as a Mainland Company by being a non-Qualifying Freezone Person:

View attachment 4884

How? By not providing an Audit:

View attachment 4885

You need to work with the "Negatives" of what's in the written law - it's the same with the Excluded Activity List - it's a final List of Excluded Activities and E-Commerce, Marketing and Consulting is not explicitly mentioned hence it's part of the Included Activities even if not mentioned explicitly there either.

Again - if this sloppy wording is now genius or just mismanagement is another question.

I attach the above Ministry Decision here for everyone again.


That's your opinion and that's fine but stop spreading here false information if you are not familiar with the matter - again if you position yourself like this instead of saying you "think" - we have no other choice then showing everyone that this is false and misleading information.


Already written - get's published during today - we report here back once online.

Fred said;

"You need to work with the "Negatives" of what's in the written law - it's the same with the Excluded Activity List - it's a final List of Excluded Activities and E-Commerce, Marketing and Consulting is not explicitly mentioned hence it's part of the Included Activities even if not mentioned explicitly there either."
------


(freezone to freezone) is free of tax in any activity you do, however excluded from this is if you do an "excluded activity"
Excluded Activities are excluded "EXCLUDED FROM BEING TAXFREE" (freezone to freezone) and (freezone to mainland) and (freezone to non-uae) - thats the reason why its mentioned, these activities are at 9% tax regardless.

(freezone to non-uae) is free of tax in any activity you do - as long as its NOT A. an "excluded activity"(like above) AND its also on the "Qualifying" list. For example - if you are selling facebook traffic then this activity is clearly NOT on the "excluded list" so free of tax test 1 has passed, but also not on the "Qualifying" List - which means its taxable.

So for freezone to non-uae to be free of tax your activity CANNOT be on excluded list AND has to be ON the qualifying list.

Now there is a point on the qualifying list that says that ancillary activities to any of the qualifying list are also tax exempt. However looking at that list, I find it very hard to believe that any sane man like fred even would say; " We do marketing for goods" so its ancillary to "(a) Manufacturing of Goods or Materials" or ancillary to (b) Processing of Goods of Materials.

Indeed article 2 (4) specifically says "an activity shall be considered ancillary where it serves no independent function but is necessary for the performance of the main qualifying activity".

As much as I like to believe this - I would for now disagree with freds statement in his article and his post above as these are facts not in existence and a conclusion by Fred like "...hence it's part of the Included Activities" is without merit or evidence.

Especially since taken in to account Article 2 point 2 whereby its referenced what the definitions of what "manufacturing of goods or materials" could ACTUALLY mean by referencing some other law statute. (rather than someones layman terms).

However I am fully aware that there is a gap between whats written, whats enforced and how you can dress things up.

For example - There is a lot of marketing online for a service like for a casino / online gambling. These are not goods or materials, so cannot be exempt. Now what we doing, is saying or just invoicing as such, I do marketing for the roulette tables? I mean everyone to their own but its a risk and I doubt any sane person would agree.

Then again who is sane in Disneyland UAE


https://www.offshorecorptalk.com/th...fication-of-freezone-qualifying-income.41469/

 

[Fred]

Fred said;

"You need to work with the "Negatives" of what's in the written law - it's the same with the Excluded Activity List - it's a final List of Excluded Activities and E-Commerce, Marketing and Consulting is not explicitly mentioned hence it's part of the Included Activities even if not mentioned explicitly there either."
------


(freezone to freezone) is free of tax in any activity you do, however excluded from this is if you do an "excluded activity"
Excluded Activities are excluded "EXCLUDED FROM BEING TAXFREE" (freezone to freezone) and (freezone to mainland) and (freezone to non-uae) - thats the reason why its mentioned, these activities are at 9% tax regardless.

(freezone to non-uae) is free of tax in any activity you do - as long as its NOT A. an "excluded activity"(like above) AND its also on the "Qualifying" list. For example - if you are selling facebook traffic then this activity is clearly NOT on the "excluded list" so free of tax test 1 has passed, but also not on the "Qualifying" List - which means its taxable.

So for freezone to non-uae to be free of tax your activity CANNOT be on excluded list AND has to be ON the qualifying list.

Now there is a point on the qualifying list that says that ancillary activities to any of the qualifying list are also tax exempt. However looking at that list, I find it very hard to believe that any sane man like fred even would say; " We do marketing for goods" so its ancillary to "(a) Manufacturing of Goods or Materials" or ancillary to (b) Processing of Goods of Materials.

Indeed article 2 (4) specifically says "an activity shall be considered ancillary where it serves no independent function but is necessary for the performance of the main qualifying activity".

As much as I like to believe this - I would for now disagree with freds statement in his article and his post above as these are facts not in existence and a conclusion by Fred like "...hence it's part of the Included Activities" is without merit or evidence.

Especially since taken in to account Article 2 point 2 whereby its referenced what the definitions of what "manufacturing of goods or materials" could ACTUALLY mean by referencing some other law statute. (rather than someones layman terms).

However I am fully aware that there is a gap between whats written, whats enforced and how you can dress things up.

For example - There is a lot of marketing online for a service like for a casino / online gambling. These are not goods or materials, so cannot be exempt. Now what we doing, is saying or just invoicing as such, I do marketing for the roulette tables? I mean everyone to their own but its a risk and I doubt any sane person would agree.

Then again who is sane in Disneyland UAE


https://www.offshorecorptalk.com/th...fication-of-freezone-qualifying-income.41469/

No worries - that's fine and even for you - look at the earlier post explaining "escape-Clause" and "worst case tax".

Beside of that I would just use logic - does the UAE now really only want to attract metal producing companies? Does the UAE even has the space to attract 100s of metal producing companies?

Or is UAE not more after new economy with there Vision 2030 and there general position in regards to the future of business?

No matter if you accept our conclusion or not - the conclusion made here by the majority of the user doesn't make sense either from economy point of view.

 

[Au999]

Out of interest 'metal producing companies' includes gold yeah? I think I see some major ancillary action there

 

[bedouin]

I think I see some major ancillary action there

I find it funny how some people here consider that their totally twisted understanding of "ancillary" just to be able to fool their own selves into accepting that their marketing / consulting FZCO is indeed qualifying income. Good luck explaining that reasoning to the FTA if they ever ask for explanations.

The chances for the authorities to actually reach out and say "hey you're dodging taxes here" is low because they don't have a huge task force team to tackle this, but they will and the fact that they don't ask doesn't mean you're clear. If they ever look into it, you will pay, plus a huge fine.

You may be able to fool yourselves same way people fool themselves saying "h00kers are not cheating on your wife", but we all know youre just fooling yourselves. You will not be able to fool the tax authorities if they ask.

 

[drumtraks]

I'm confused about something.

According to what I've seen so far, non-qualifying FZ entities that have revenue < 50 Mil and taxable income under 375k are not required to pay CIT and not even prepare audited financial statements. Is this true? If so, how can the taxman know you're really telling the truth since you're not doing accounting?

Maybe @Fred can chime in?

 

[Au999]

I find it funny how some people here consider that their totally twisted understanding of "ancillary" just to be able to fool their own selves into accepting that their marketing / consulting FZCO is indeed qualifying income. Good luck explaining that reasoning to the FTA if they ever ask for explanations.

The chances for the authorities to actually reach out and say "hey you're dodging taxes here" is low because they don't have a huge task force team to tackle this, but they will and the fact that they don't ask doesn't mean you're clear. If they ever look into it, you will pay, plus a huge fine.

You may be able to fool yourselves same way people fool themselves saying "h00kers are not cheating on your wife", but we all know youre just fooling yourselves. You will not be able to fool the tax authorities if they ask.

I literally build in-house assets for gold refineries. No twisting required

 

[ShillGates]

No worries - that's fine and even for you - look at the earlier post explaining "escape-Clause" and "worst case tax".

Beside of that I would just use logic - does the UAE now really only want to attract metal producing companies? Does the UAE even has the space to attract 100s of metal producing companies?

Or is UAE not more after new economy with there Vision 2030 and there general position in regards to the future of business?

No matter if you accept our conclusion or not - the conclusion made here by the majority of the user doesn't make sense either from economy point of view.

I agree with you 100% re the economy.

Just that you cannot state with 100% certainty that your proposed solution of "ancillary activities" regarding marketing is actually as black and white as you make it out to be. Which I wanted to bring to the attention of anyone involved. It is a risk to go down this route for now. And yes, enforcement might be lacking, or never comes but one phone call from the EU and USA and they will perhaps.....

Still its tax free till 375k aed as you say and I agree with that 100%. Pay your self a hefty salary so 800-900k USD tax free. Also you can create some losses right now as well by paying salary on paper or some other tricks, so you get a nice debt of the company to yourself. So you can bury yourself in for about 3-4Million anyway taxfree

 

[Fred]

I agree with you 100% re the economy.

Just that you cannot state with 100% certainty that your proposed solution of "ancillary activities" regarding marketing is actually as black and white as you make it out to be. Which I wanted to bring to the attention of anyone involved. It is a risk to go down this route for now. And yes, enforcement might be lacking, or never comes but one phone call from the EU and USA and they will perhaps.....

Still its tax free till 375k aed as you say and I agree with that 100%. Pay your self a hefty salary so 800-900k USD tax free. Also you can create some losses right now as well by paying salary on paper or some other tricks, so you get a nice debt of the company to yourself. So you can bury yourself in for about 3-4Million anyway taxfree

That's it.

Our statement is our roadmap for existing clients and everyone who wants to become a client.

We don't need to convince anyone here but we need to guide and support our existing clients - which si far were well served by sticking to our provided roadmap.

For everyone else the "escape-Clause" and "Worst Case Tax" as well as our "All-Inclusive Package Plus" might be interesting.

Another logic thing I want to add here is the fact that someone like @bedouin is now acting like the UAE would have become a Central European Country from Tax Point of View while in reality it's still the best deal you can get and other like Malta and Cyprus basically leave from the disconnect between the written law and law enforcement - I hear guys already looking to relocate to Georgia and Kazakhstan while Citizens of this Countries looking to setup in Dubai.

Lifestyle - everyone with a decent amount of wealth puts Lifestyle over 1-2% tax savings and if you take this into consideration then the truth is that UAE was selling too cheap at 0% CT as it's for sure more then a Vanuatu, Bahamas or Cayman Islands from Lifestyle point of view.

 

[troubled soul]

Still there is a hope .... top Tax/Audit firm mention something really interesting....,,,seems there is still hope or another mirage in dessert
https://www.nrdoshi.ae/corporate-tax-services-in-uae/

Will Corporate Tax be Applicable to Free Zones?​

• Corporate Tax will apply to businesses in UAE’s free zones. However, free zone businesses that comply with the regulatory requirements and do not conduct business in mainland UAE will continue to enjoy corporate tax incentives.
• Free zone businesses must register themselves and file corporate returns.

 

[yoyodubai]

Is the sale of a freezone company asset (for instance a website) to a non-UAE buyer subject to corporate tax?

 

[manukahoney]

Is the sale of a freezone company asset (for instance a website) to a non-UAE buyer subject to corporate tax?

That is unclear. Some say it will be taxed, some say it will be not.
Unfortunately, there is no clear framework available yet, so the safe approach would be to consider any income received from the non-Qualified activities as a subject to CIT and act accordingly.

 

[yoyodubai]

That is unclear. Some say it will be taxed, some say it will be not.
Unfortunately, there is no clear framework available yet, so the safe approach would be to consider any income received from the non-Qualified activities as a subject to CIT and act accordingly.

Understood. Thank you.

My financial year is may to april.

Am I correct that corporate tax will only be applicable for my financial year may to april 2024-25?

 

[JackAlabama]

Understood. Thank you.

My financial year is may to april.

Am I correct that corporate tax will only be applicable for my financial year may to april 2024-25?

No.
Your year is May 2023-April 2024. So it will be June 2023 to April 2024 which is taxable, May 2023 you get for tax free as goodie

Jan-Dec: For these its starting Jan24. Like most European use this since its the calendar year.
If you had year: September-August. Youd have to do 8 months of tax in 2024.


I have no special insights to this complicated matter, just applying some guessing.

 

[yoyodubai]

No.
Your year is May 2023-April 2024. So it will be June 2023 to April 2024 which is taxable, May 2023 you get for tax free as goodie

Jan-Dec: For these its starting Jan24. Like most European use this since its the calendar year.
If you had year: September-August. Youd have to do 8 months of tax in 2024.


I have no special insights to this complicated matter, just applying some guessing.

Hmm. This doesn't seem right to me, but I'll do some more research on this.

It's fun (and somewhat sad) how nothing about the new corporate tax rules are clear. I definitely now understand why businesses prefer to set up elsewhere and pay higher tax, but receive regulatory clarity.